Mortgage Rates Nudge Higher; Why It Soon May Be Easier to Buy a Home

Finding the Right Mortgage, Mortgage Rates, Mortgages
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Mortgage rates edged slightly higher this week but remain well below 4% as the spring homebuying season hits prime time. And more good news: First-time homebuyers may find it easier to get approved for a home loan when a new automated underwriting system goes into effect in June.

Freddie Mac’s just-released weekly survey of lenders shows the following average rates for the most popular home loan terms:

  • 30-year fixed-rate mortgages averaged 3.66% with an average 0.6 point for the week ending April 28, 2016. A year ago, the rate averaged 3.68%.
  • 15-year fixed rates averaged 2.89% with an average 0.6 point. The same term priced at 2.94% a year ago.
  • 5-year adjustable-rate mortgages priced at 2.86% with an average 0.5 point. Last year at this time, the same ARM averaged 2.85%.

mortgage rates

“Treasury yields marched higher this week. As a result, the 30-year mortgage rate jumped seven basis points to 3.66%,” Sean Becketti, chief economist for Freddie Mac, said in a release. “The Federal Reserve’s decision to leave the Federal funds rate unchanged triggered a nine-basis-point drop in the 10-year Treasury yield on Wednesday; however, the drop occurred too late to impact this week’s survey.”

Meanwhile, the home loan market softened as mortgage applications fell 4.1% for the week ending April 22, 2016, according to the Mortgage Bankers Association.

Purchase applications were down 2%, as refi applications dipped 5% from the previous week. Overall, home purchase applications remain 14% higher than the same week one year ago.

New credit analysis system could help first-time homebuyers qualify for a mortgage

When you apply for a mortgage, there’s an awkward moment — after all of your personal data has been collected — when your application is submitted for approval to a higher authority: A computer algorithm.

Before your loan package lands on a desk in the lender’s underwriting department, its fate is determined in just seconds by an automated system linked to the hidden mortgage machinery that powers the U.S. housing system: Fannie Mae, Freddie Mac, FHA and the rest. Without the stamp of approval from one of these quasi-government entities, your dream of homeownership is more notion than reality.

But on June 25, some of that artificial intelligence will be working harder on your behalf.

On that date, Fannie Mae, which provided about $516 billion in liquidity to the mortgage market in 2015, will begin utilizing “trended consumer credit data” as a part of its automated assessment of mortgage applicants. That means looking beyond your credit score and considering just how you pay your consumer debt.

The new data will compile up to 30 months of payment history and determine actual debt behavior. Things like: Do you pay off consumer credit balances each month — or simply send the minimum due?

Credit reporting firm TransUnion says the impact of such analysis could provide consumers “better pricing and access to mortgage loans.” In fact, the number of applicants who generally have the most access to new loans and qualify for the lowest rates could increase from 12% of the population to nearly 21%, TransUnion says.

It will also benefit “thin file” applicants — potential first-time homeowners, such as millennials, who don’t have an extensive credit history or high credit scores.

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Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick.